Asia-Pacific Data Center Service Providers, 2017 - FROST INDUSTRY QUOTIENT (IQ) FROST

 
Asia-Pacific Data Center Service Providers, 2017 - FROST INDUSTRY QUOTIENT (IQ) FROST
FROST   FROST INDUSTRY QUOTIENT (IQ)

        Asia-Pacific Data Center
        Service Providers, 2017
Asia-Pacific Data Center Service Providers, 2017 - FROST INDUSTRY QUOTIENT (IQ) FROST
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     Table of Contents
             1. Market Definition and Scope                          3
                     1.1 Data Center                                 3
                     1.2 Data Center Operating Models and Services   3
             2. Market Assessment                                    5
                     2.1 Market Size and Forecast                    5
                     2.2 Competitive Landscape                       6
             3. Market Assessment                                    7
                     3.1 Regulation                                  7
                     3.2 Economic                                    7
                     3.3 Technology                                  8
                     3.4 Competition                                 8
             4. Frost IQ Matrix: Asia-Pacific Data Center Service    9
                Providers, 2017
             5. Profiles of Main Data Center Service Providers       10
                     5.1     NTT Communications                      11
                     5.2     Fujitsu                                 12
                     5.3     Telstra                                 13
                     5.4     CenturyLink                             14
                     5.5     KDDI Telehouse                          15
                     5.6     Equinix                                 16
                     5.7     STT Global Data Centres                 17
                     5.8     Singtel                                 18
                     5.9     China Telecom                           19
                     5.10    Digital Realty                          20
                     5.11    Global Switch                           21
                     5.12    Keppel Data Centres                     22
             6. Other Data Center Service Providers to Watch         23
             7. The Analyst Word                                     25
             8. Frost IQ Methodology                                 25
Asia-Pacific Data Center Service Providers, 2017 - FROST INDUSTRY QUOTIENT (IQ) FROST
ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                             WWW.FROST.COM

                 MARKET DEFINITION
    1            AND SCOPE
1.1 DATA CENTER

A data center is critical for enterprises operating in the present borderless world globally. Whether private
or public, the data center is essential for hosting mission-critical applications. These data centers help
organizations streamline information while enabling easy access to users and customers from anywhere across
the globe.

A data center stores computer systems and associated components commonly including a raised floor,
backup power supplies, redundant data communication connections, environmental controls (such as for air
conditioning and fire suppression), and security devices.

1.2 DATA CENTER OPERATING MODELS AND SERVICES

Data centers may operate on two main models. One is for an organization to build, operate, and manage its
own data center for internal purposes, known as a captive data center. The other is the outsourced model,
where organizations lease space and hosting services from external data center providers. These providers
offer the security, power, and cooling needs for the data center and customers can use the space to deploy
their servers and other equipment. This report focuses on companies providing outsourced services.

Exhibit 1 below illustrates the operating models for data centers.

Exhibit 1: Data Center Operating Models

                                                   DATA CENTERS

                            CAPTIVE                                  OUTSOURCED

Source: Frost & Sullivan analysis

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Asia-Pacific Data Center Service Providers, 2017 - FROST INDUSTRY QUOTIENT (IQ) FROST
FROST INDUSTRY QUOTIENT                                                                          WWW.FROST.COM

In the outsourced data center model, data center providers can offer a combination of services:

  COLOCATION                 Colocation refers to pure space rental, including floor space, cages or racks
  SERVICES                   in different sizes. Basic infrastructure-level support such as power, cooling,
                             and physical security measures, as well as basic network connectivity, are
                             provided. Customers pay a monthly or annual rental fee for the space and basic
                             facilities, but they need to purchase their own servers and send their in-house
                             IT resources to manage the servers.

  MANAGED                    Managed hosting services include the provision of servers. Customers do not
  HOSTING                    need to purchase their own servers. Instead, they rent the servers from the data
  SERVICES                   center operator together with other specified equipment. Managed hosting
                             comes in two types – sharing the server with others or having a dedicated
                             server. Customers can still access their servers as they wish without having to
                             allocate their own IT resources at the data centers as the data center operator
                             provides 24x7 system support such as monitoring and rebooting. This often
                             includes operating system management and software security management.

Exhibit 2 below illustrates the range of services offered under the outsourced data center business model.

Exhibit 2: Data Center Services – Market Definition

                 SERVICE LEVEL

                   OS

                                            MANAGED HOSTING
                                            Rental of servers with basic services such as Monitoring
             SERVER
                                            and System Reboot

          NETWORK             COLOCATION
                              Pure rental of data center floor space, cage,
                              or empty racks with basic power, cooling, and
                              bandwidth
INFRASTRUCTURE

                                             PRICE CHARGEABLE TO CUSTOMERS

This study has not taken into consideration private/captive data centers. All the companies profiled in the
Frost Industry Quotient (Frost IQ) Matrix are market participants operating in Asia-Pacific.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                            WWW.FROST.COM

                                  MARKET
   2                              ASSESSMENT
2.1 MARKET SIZE AND FORECAST

Frost & Sullivan estimates the Asia-Pacific data center services market to be worth US$14.13 billion in revenue
in 2016, representing a growth of 15.3% over 2015. The market will grow at a compound annual growth rate
(CAGR) of 14.7% from 2015-2022 to reach US$31.95 billion at the end of 2022. The key theme driving growth
across Asia-Pacific is the explosive digital needs of emerging economies with huge populations such as China,
India, and Indonesia. Furthermore rising complexities within the IT infrastructure brought about by virtualization
and consolidation, coupled with various cost constraints, are encouraging enterprises to look into adopting
third-party data center services. This is spurring the strong growth of managed hosting, especially across
emerging economies.

Exhibit 3: Data Center Services Market: Market Revenue Forecast by Segment Asia-Pacific, 2014 - 2022

                         35,000                           CAGR (2015-2022)=14.7%                                     16

                         30,000                                                                                      15.5

                                                                                                                            REVENUE GROWTH RATE (%)
   REVENUE ($ MILLION)

                         25,000
                                                                                                                     15

                         20,000
                                                                                                                     14.5
                         15,000

                                                                                                                     14
                         10,000

                                                                                                                     13.5
                          5,000

                             0                                                                                       13.0
                                  2014    2015    2016      2017        2018     2019     2020     2021     2022
   Managed Hosting                3,742   4,435   5,253     6,218       7,351    8,683    10,222   11,989   13,975
   Colocation                     6,883   7,828   8,880    10,051       11,343   12,760   14,298   16,034   17,971
   Growth Rate                            15.4     15.3     15.1        14.9      14.7     14.4     14.3     14.0

Source: Frost & Sullivan analysis

While there is a greater adoption of managed hosting services, colocation services continue to dominate
data center services revenue. As illustrated in Exhibit 3 above, colocation services account for the bulk of
market revenue at 62.8% in 2016. This will continue to be driven by large enterprises and highly regulated
verticals, such as Banking, Financial Services, and Insurance (BFSI), which require strict data confidentiality
and complete management control of their operations. In addition, cloud service providers are also generating
new demand for colocation as they opt for third-party facilities to host their infrastructure for providing
services to customers.

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FROST INDUSTRY QUOTIENT                                                                             WWW.FROST.COM

It is noteworthy that some enterprises have chosen to bypass management of their IT operations and migrate
straight to cloud services such as Infrastructure-as-a-Service (IaaS). The growth of cloud services thus poses
a cannibalization effect to the outsourced hosting market. In response to this, many service providers have
expanded data center service offerings to include cloud-based offerings as well.

2.2 COMPETITIVE LANDSCAPE

The Asia-Pacific data center services landscape is dominated by telecommunications companies/carriers
such as NTT Communications (Japan), China Telecom (China), Singtel (Singapore), and Telstra (Australia).
Telecom companies own the underlying network infrastructure, which allows them to have full control over
their offerings – from an IT service delivery as well as from a connectivity perspective. Thus they benefit from
the ability to offer an end-to-end proposition to customers comprising data center services, connectivity,
cloud offerings, and value-added services such as managed security and disaster recovery, among others.

As demand for data center services in Asia-Pacific grows, facility pure-play vendors (e.g., Digital Realty, US;
Equinix, US; Global Switch, UK) and carrier-neutral data center providers (e.g., Fujitsu, Japan) have also tapped
on the growth trajectory by building new data center facilities or by expanding existing ones.

Frost & Sullivan considers pure-play public cloud providers such as Amazon Web Services, Microsoft Azure,
and Google as Infrastructure-as-a-Service (IaaS) service providers. Thus these vendors are not considered in
the competitive landscape for the purpose of this report.

Market shares held by key data center market participants in Asia-Pacific are shown below in Exhibit 4.

Exhibit 4: Data Center Services Market: Market Shares by Revenue of Key Data Center Providers, Asia-Pacific, 2016

                                                                       NTT COMMUNICATIONS
                                                                       9.7%

                                                                                  CHINA TELECOM
                                                                                  8.0%

                                                                                        EQUINIX
                                                                                        5.3%

                  OTHERS                                                                 FUJITSU
                   62.0%                                                                 5.4%

                                                                                     SINGTEL 2.4%
                                                                                    KDDI - TELEHOUSE 1.8%
                                                                                   TELSTRA 1.5%
                                                                                  GLOBAL SWITCH 1.3%
                                                                                 DIGITAL REALTY 0.9%
                                                                                CENTURYLINK 0.4%
                                                                               KEPPEL DC 0.4%
                                                                             STT GDC 0.9%

Source: Frost & Sullivan analysis

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                  WWW.FROST.COM

The top 12 market participants account for 38.0% of the market revenue in 2016. NTT Communications leads
the Asia-Pacific data center service providers with a market share of 9.7%. It also emerges as the vendor with
the highest revenue realisation per square meter of raised floor space. China Telecom holds the second largest
market share at 8.0% and also has the largest raised floor space presence in Asia-Pacific. This is followed by
Fujitsu and Equinix, with market shares of 5.4% and 5.3% respectively.

The Asia-Pacific data center landscape is highly fragmented, as increasing data sovereignty concerns have
given rise to dominating vendors in the respective countries. These vendors include PCCW Global (Greater
China), Telkomsigma (Indonesia), AIMS (Malaysia), VADS (Malaysia), and Telin (Indonesia). As such, while these
market participants are not plotted in the Frost IQ Matrix because they fall short of meeting the selection
criteria, they are notable vendors in their respective countries. More details of key country-specific vendors to
watch out for can be found in Section 6: Other Data Center Service Providers to Watch.

                 MARKET
   3             ASSESSMENT
In this section, Frost & Sullivan examines the key trends shaping the data center industry in Asia-Pacific.

3.1 REGULATION

Data center regulations run the gamut from pro-business (e.g., in Singapore, Hong Kong), to those that involve
stringent censorship and rigid regulations favoring local participants (e.g., in China, Indonesia). In pro-business
territories such as in Singapore, the government has been proactive in its efforts to offer tax incentives to
attract multinational corporations (MNCs) and service providers to expand their data center capabilities in the
country.

On the other hand, stringent censorship regulations continue to pose the biggest hurdle for foreign investors
entering the Chinese market. The Chinese regulator, Ministry of Industry and Information Technology (MIIT), has
also largely favored the issuance of Internet data centre (IDC) licenses to local vendors to date. Meanwhile in
Indonesia, government Regulation No. 82 mandates Indonesian businesses conducting electronic transactions
to store personal data in data centers in the country. Official compliance with Regulation No. 82 is expected
to kick in with effect from the second half of 2017, posing an additional barrier of entry for foreign data center
market participants.

3.2 ECONOMIC

The International Monetary Fund estimates that gross domestic product (GDP) growth among the Asia-Pacific
economies is expected to slow down to about 5.3% during 2016 – 2017. Nevertheless the Asia-Pacific region
remains the key pillar of growth for the global economy. In turn, governments of many Asia-Pacific countries
have been able to commit to massive investments to develop the data center industry. For instance, the
Thai government has introduced its digital economy plan, aimed to shift Thailand’s economy towards the IT
industries, with a focus on the development of data centers and cloud computing. Separately, the Singapore
government has invested in the establishment of a Data Center Park (DCP) with an estimated rackable space
of 105,000 square meters, to attract enterprises to set up their data center operations in Singapore.

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FROST INDUSTRY QUOTIENT                                                                        WWW.FROST.COM

However, rising GDP brings about higher operating costs in the form of labor, power, and connectivity costs.
In recent years, data center providers in Hong Kong have reported diminishing margins as operating costs
increase. Additionally, spatial constraints in Hong Kong and Singapore result in high property prices, further
increasing financial burdens of service providers.

3.3 TECHNOLOGY

Broadband access speeds vary drastically across countries in Asia-Pacific, which could either drive or inhibit
the adoption of IT services such as cloud computing. According to the ICT Development Index 2016, a
global index published by the United Nations measuring Information and Communication Technologies (ICT)
performance across various countries, South Korea is ranked first among 175 countries. Meanwhile, Indonesia
and India are ranked 115th and 138th place respectively. Nevertheless this will improve given investments by
many governments to improve the ICT infrastructure of their respective countries. For instance the Indonesian
government has committed US$23.2 billion under the “2014-2019 Indonesia Broadband Plan” to improve
broadband speeds and connectivity in the country.

As the data center ecosystem becomes more complex, demand for data center infrastructure management
(DCIM) tools also increases. This is especially prevalent in more technologically-advanced countries such as
Japan. DCIM tools allow data center managers to optimize data center infrastructure and operations with
increasing visibilities, by understanding usage patterns of resources, and optimizing the use of power and
cooling.

3.4 COMPETITION

The Asia-Pacific data center market is highly competitive, with significant build-outs giving rise to concerns
of supply gluts in countries such as Australia and Singapore. Data center providers are enhancing their core
propositions by diversifying their service offerings into cloud services and other managed services, in order to
provide an end-to-end solution for users.

Green data center offerings have become a necessity, with an increasing focus on water consumption and
refrigerant use alongside energy efficiency. The continuous evolution of intelligent thermal controls has given
rise to the emergence of data centers with Power Usage Effectiveness (PUE) of below 1.2 in Japan. This is
significantly lower than the average PUE rating of around 1.8 recorded by data centers globally.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                               WWW.FROST.COM

                 FROST IQ MATRIX: ASIA-
   4             PACIFIC DATA CENTER
                 SERVICE PROVIDERS, 2017
Data center service providers selected for evaluation in the Frost IQ benchmarking exercise fulfil the following
two criteria: (1) Operate data centers in at least two countries in Asia-Pacific, and (2) generated revenue from
Asia-Pacific data centers of more than US$60 million in 2016. Based on these, Frost & Sullivan plotted the
respective vendors on the Frost IQ Matrix. The key criteria evaluated in positioning companies on the matrix
are:

         REVENUE MARKET SHARE;                                  ECOSYSTEM STRATEGY; AND

         PRODUCT/SERVICE STRATEGY;                              BUSINESS STRATEGY

         PEOPLE AND SKILLS STRATEGY;

Exhibit 5: Frost IQ Matrix of Data Center Providers in Asia-Pacific

                                                               FUJITSU
                                  TELSTRA                                               NTT
                                                                             COMMUNICATIONS
                       CENTURY LINK
                               KDDI TELEHOUSE
                       STT GDC
                       DIGITAL    SINGTEL                      EQUINIX
                       REALTY                                                    CHINA
                                                                                TELECOM
                            GLOBAL SWITCH

                                CHALLENGERS                              CHAMPIONS

                      KEPPEL DC

                                  EXPLORERS                              DEFENDERS

Source: Frost & Sullivan analysis

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FROST INDUSTRY QUOTIENT                                                                           WWW.FROST.COM

 Twelve major data center service providers in Asia-Pacific fulfil the selection criteria and are plotted on the
 Frost IQ Matrix. Four data center providers, NTT Communications, China Telecom, Fujitsu, and Equinix, are in
 the Champions’ quadrant. NTT Communications leads the industry with the highest revenue market share as
 well as growth strategy in Asia-Pacific. It is well-positioned as the leading vendor, notably for its comprehensive
 portfolio of offerings, presence in the region, as well as maturity of channel partner ecosystem.

 Seven other data center providers are in the Challengers’ quadrant. They are Singtel (Singapore), KDDI
 Telehouse (Japan), Telstra (Australia), STT Global Data Centres (Singapore), Global Switch (Australia), Digital
 Realty (US), and CenturyLink (US). Singtel leads these seven service providers in terms of revenue market
 share. However Telstra emerges as the vendor within the quadrant with the strongest future growth strategy,
 driven by its integrated data center portfolio bundled with value-added services, as well as future expansion
 plans in Asia-Pacific.

 Keppel Data Centres is a relative newcomer in the industry and is plotted in the Explorers’ quadrant. Frost
 & Sullivan expects the vendor to grow strongly in the near future, given its aggressive growth strategy and
 expansion plans in recent years.

                 PROFILES OF MAIN
    5            DATA CENTER SERVICE
                 PROVIDERS
 The respective profiles of the data center service providers benchmarked in the Frost IQ Matrix are detailed
 below. The analyst strategy score represents the service providers’ growth strategy, out of a 100-point scale.
 More details of the strategy score can be found in Section 8: Frost IQ Methodology – Growth Strategy.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                    WWW.FROST.COM

5.1 NTT COMMUNICATIONS

NTT Communications (Japan), together with Netmagic Solutions                          ANALYST STRATEGY SCORE
in India, operates an extensive network of 109 data centers across 11

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countries in Asia-Pacific. The vendor occupies around 200,000 square
meters of floor space in Asia-Pacific, of which an estimated 62% is
located in Japan.

In 2016, NTT Communications contributed 9.7% to the Asia-Pacific data
center services market revenue.

  COMPETITIVE               Robust end-to-end service capabilities offerings: NTT Communications distinguishes
  ADVANTAGES                itself from other participants through its ability to offer comprehensive value-
                            added services alongside colocation and managed hosting services. These include
                            cloud solutions, managed security, network/VoIP (Voice over Internet Protocol),
                            SDN (Software-defined Networking) and NFV (Network Functions Virtualization)-
                            integrated web, and cloud-based VPNs (Virtual Private Networks), among others.
                            By bringing value-added services to its data center customers, NTT has attained one
                            of the highest “revenue realization per square meters” among market participants in
                            Asia-Pacific in 2016.

                            Concrete plans for further expansion across Asia-Pacific: NTT Communications
                            increased its presence in Indonesia following the acquisition of Indonesian data
                            center service provider Cyber CSF in October 2015. It continues to have concrete
                            plans for further expansion to build a resilient network of data centers across Asia-
                            Pacific. For instance, under Netmagic Solutions, there are plans to establish two
                            more data centers in India in the next three years to serve the eCommerce, financial
                            services, and media sectors.

  CHALLENGES               Strong competition in existing markets, especially Japan: NTT Communications
                           continues to generate the bulk of its revenue from Japan, despite having data centers
                           across key cities in Asia-Pacific. The Japan data center market is highly saturated and
                           has strong incumbents such as Fujitsu, thereby limiting NTT’s potential for revenue
                           growth in the region.

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FROST INDUSTRY QUOTIENT                                                                               WWW.FROST.COM

5.2 FUJITSU

Fujitsu (Japan) is a leading systems integrator and provider of IT services            ANALYST STRATEGY SCORE
globally. The vendor focuses on offering data center services as part of its

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bundling strategy to manage a greater share of enterprise ICT infrastructure,
and provides end-to-end IT consulting and outsourcing solutions. In Asia-
Pacific, Fujitsu operates/leases a network of 81 data centers primarily in
Japan, Australia, and Singapore. In 2016, new annexes were constructed
for the expansion of the existing Tatebayashi Data Center and Akashi Data
Center in Japan, which will add 50% more data center space to Fujitsu’s
existing capacity in Japan.

In 2016, Fujitsu contributed 5.4% to the Asia-Pacific data center services
market revenue.

  COMPETITIVE              Expertise in providing end-to-end ICT outsourcing portfolio: Fujitsu’s core
  ADVANTAGES               strengths lie in its systems integration and end-to-end ICT outsourcing capabilities.
                           This allows Fujitsu to offer customized offerings, comprising data center operations,
                           ICT infrastructure management, and global delivery networks, among others.

                           Aggressive expansion strategy in Asia-Pacific: Fujitsu is expanding aggressively in
                           Asia-Pacific, as evident from the recent expansion of data center facilities in Japan,
                           as well as the establishment of its third data center in the West of Singapore in 2016.
                           There are clear expansion plans in other regions as well. For instance, as part of its
                           2025 roadmap, Fujitsu Australia is undergoing a nationwide strategy of expansion and
                           refurbishing selected sites, to upgrade power infrastructure and internal capacities.
                           These include investments in the Western Sydney data center, as well as undergoing
                           Tier 4 Uptime certification for its Western Australian data center, in order to offer
                           higher value secure services to support cloud, Internet of Things (IoT), and big data
                           offerings.

  CHALLENGES              Slow expansion plans in high-growth emerging economies: While Fujitsu plans
                          to expand its network of data centers in the Philippines, Malaysia, and Indonesia, it
                          currently still has a weak coverage in these countries. For instance in 2016, 96.1% of the
                          vendor’s total raised floor space in Asia-Pacific is in Japan, Australia and China, while
                          the rest of the emerging countries represent the remaining 3.9%. As such, Fujitsu may
                          be slow to leverage on the growth of emerging economies such as Indonesia, which is
                          expected to lead the Asia-Pacific data center revenue growth within the next 5 years.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                       WWW.FROST.COM

5.3 TELSTRA

Telstra (Australia) has been investing significantly in its data center                 ANALYST STRATEGY SCORE
and network capabilities in Asia-Pacific in recent years. A noteworthy

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investment is the acquisition of Pacnet Limited (Hong Kong and Singapore)
in April 2015, which enables Telstra to operate the largest submarine cable
network in Asia-Pacific and bolster its data center presence significantly in
the region. Telstra operates 58 data centers globally, of which more than
20 are located in Australia. The vendor’s data center services recorded
revenue growth in excess of 30% in 2016, driven mainly by managed
hosting services.

In 2016, Telstra contributed 1.5% to the Asia-Pacific data center services
market revenue.

  COMPETITIVE               Integrated data center portfolio bundled with connectivity: The Pacnet acquisition
  ADVANTAGES                has been instrumental to Telstra’s integrated data center strategy, by enabling the
                            vendor to bundle its data center portfolio with advanced SDN capabilities.

                            Greater expansion reach into China: The joint venture between Telstra and Pacnet
                            Business Solutions China (PBS) in 2015 is also advantageous in serving as Telstra’s
                            springboard into mainland China. Telstra is well-positioned to tap on PBS’s extensive
                            network footprint across 23 provinces in mainland China, as well as established
                            relationships with the Chinese government and carriers, to expand its integrated
                            data center portfolio reach in the region.

  CHALLENGES               Mindshare for connectivity services remains stronger than data center offerings
                           for now: Telstra still primarily commands mindshare as a superior connectivity and
                           multi-cloud orchestration vendor, and less so for its data center offerings. It also faces
                           intense competition within its major market Australia from the likes of Global Switch
                           and Fujitsu, thereby limiting its potential for growth in the region.

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FROST INDUSTRY QUOTIENT                                                                               WWW.FROST.COM

5.4 CENTURYLINK

CenturyLink operates four colocation data centers in Asia-Pacific.                      ANALYST STRATEGY SCORE
Additionally it operates managed services and cloud pods in additional

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data centers across Shanghai, Bangalore and Sydney. Through a network
of partners, CenturyLink is able to extend its colocation reach in Shanghai
and Australia as well.

In May 2015, the vendor established its first cloud data center in
Singapore. This marked the first location in Asia-Pacific for CenturyLink’s
cloud infrastructure which it has been consistently expanding, alongside
providing other connectivity services across the Asia-Pacific region.

In 2016, CenturyLink contributed 0.4% to the Asia-Pacific data center
services market revenue.

  COMPETITIVE              Comprehensive hybrid IT portfolio: CenturyLink offers an integrated and
  ADVANTAGES               comprehensive hybrid IT portfolio that includes colocation, managed hosting, cloud
                           services, network, and managed services. This allows the vendor high flexibility in
                           its offerings and to bundle multiple service offerings to manage a broad range of
                           delivery models in supporting its customers on their digital transformation journeys.

                           Commitment to operational excellence: CenturyLink has set a new bar in the data
                           center industry by obtaining the Uptime Institute’s Management and Operations
                           (M&O) Stamp of Approval for 52 data centers in its global portfolio, including three
                           in Asia-Pacific.

  CHALLENGES              Presence in competitive markets: CenturyLink operates solely in metro cities for now,
                          where the landscape is relatively saturated. It also faces intense competition within its
                          major market Australia from the likes of Global Switch and Fujitsu, thereby limiting its
                          potential for growth in the region. There is also a risk of excessive capacities in markets
                          like Australia and Singapore, amid increasing data center build-outs in neighbouring
                          lower-cost countries such as Malaysia and Thailand.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                   WWW.FROST.COM

5.5 KDDI TELEHOUSE

KDDI Telehouse’s (Japan) clientele is predominantly made up of                       ANALYST STRATEGY SCORE
Japanese and European companies that are developing their business

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in Hong Kong and Japan. There is an increasing focus on bringing more
US-based customers into the Asia-Pacific regions. The vendor operates
close to 30 data centers, of which the bulk of raised floor space resides
in Japan. In 2016, KDDI Telehouse launched two new facilities in Japan,
specifically Tokyo (1,300 racks) and Osaka (700 racks).

In 2016, KDDI Telehouse contributed 1.8% to the Asia-Pacific data center
services market revenue.

  COMPETITIVE               Strong presence in Greater China: KDDI Telehouse has 22,860 square meters of
  ADVANTAGES                colocation raised floor space in Beijing, Shanghai, and Hong Kong (two facilities in
                            each city) in total, making it the largest global colocation provider in the Greater
                            China region.

                            Comprehensive connectivity reach: The vendor has a network reach of over 190
                            countries, offering fully-managed networks such as the Euro-Asia link, Pan-European
                            network, and East Asia network. It also offers carrier-neutral access to connectivity
                            providers for its data centers.

  CHALLENGES               Pure-play colocation strategy outside of Japan limits monetization opportunities:
                           KDDI Telehouse remains a pure-play colocation service provider outside of Japan. This
                           limits the company’s monetization opportunities as colocation services occupy the
                           lower end of the data center value chain.

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FROST INDUSTRY QUOTIENT                                                                              WWW.FROST.COM

5.6 EQUINIX

Equinix is a leading global interconnection and data center company,                  ANALYST STRATEGY SCORE
with 150 data centers in 21 countries across five continents. The company

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provides a dynamic environment where rich business ecosystems
(8,500+ businesses), enterprises (2,250+), and cloud and IT service
providers (2,500+) interconnect to each other and to more than 1,400+
available networks. The company has 29 data centers across Asia-Pacific,
including Australia, China, Hong Kong, Indonesia, Japan and Singapore.

In 2016, Equinix contributed 5.3% to the Asia-Pacific data center services
market revenue.

  COMPETITIVE              Strong ecosystem strategy owing to continuous investments in Platform Equinix:
  ADVANTAGES               Equinix has invested US$13.5 billion over 19 years to create Platform Equinix, a
                           colocation and interconnection platform that extends across 150 global data centers in
                           41 markets. It enables high performance, secure, and reliable cloud access and service
                           deliverys. Platform Equinix interconnects clouds, networks, business ecosystems and
                           data at the edge, providing virtual control and transparency across the world’s most
                           globally interconnected data centers, within the largest cloud and network provider-
                           neutral marketplaces. With Platform Equinix, customers implement Interconnection
                           Oriented Architecture (IOA), a blueprint for becoming an interconnected enterprise,
                           and achieve their global digital transformation objectives.

                           Strong expansion strategy: Equinix practises prudent capital allocation to capture
                           first-mover advantage in future global hubs. This has resulted in continuous expansion
                           across the Asia-Pacific region, opening data centers in Melbourne and Singapore in
                           2015, as well as Tokyo and Sydney in 2016. In 2017, it has planned expansions for its
                           Hong Kong and Singapore data centers, representing an investment of over US$104
                           million.

  CHALLENGES              Strong competition in existing markets, especially Japan: Among its network of data
                          centers in Asia-Pacific, Equinix has the largest presence in Japan, in which about 25% of
                          its raised floor space resides. The Japanese data center market is highly saturated and
                          has strong incumbents such as NTT Communications, NEC, and Fujitsu. Nevertheless
                          to improve the company’s market position in Japan, Equinix acquired Bit-isle (Japan),
                          one of the leading data center service providers in Japan, in 2015. With acquisition of
                          Bit-isle, Equinix added five data centers in Tokyo. Upon the completion of the Tokyo
                          data center in 2016, Equinix will now have a total of ten IBX data centers in Tokyo and
                          one in Osaka, making the vendor the fourth largest data center operator in Japan.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                     WWW.FROST.COM

5.7 STT GLOBAL DATA CENTRES

STT Global Data Centres (“STT GDC”) (Singapore) is a wholly-owned                     ANALYST STRATEGY SCORE
subsidiary of ST Telemedia. Established in June 2014, it currently manages

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a portfolio of close to 50 data centers (including third-party sites) across
China, India, the UK, and Singapore.

STT GDC has been aggressive in its acquisition strategies. Notable
acquisition plans include a 42% stake in Chinese data center provider
GDS Services in 2014, a 70-30 joint venture with StarHub, Singapore (STT
MediaHub) in 2015. Other acquisitions include a 49% stake in UK data
centre provider Virtus Data Centres in 2015, as well as a 74% stake in Tata
Communication’s (Mumbai and Singapore) data center portfolio in India
and Singapore in 2016.

In 2016, STT Global Data Centres contributed 0.9% to the Asia-Pacific data
center services market revenue.

  COMPETITIVE               Aggressive expansion plans in Asia-Pacific, notably China and India: STT GDC has
  ADVANTAGES                demonstrated aggressive expansion plans in Asia-Pacific, notably in China and India.
                            In 2014, ST GDC acquired a 42% stake in leading Chinese data center provider GDS
                            Services in order to grow its presence in the country. Separately, the joint venture
                            with Tata is yet another clear signal that the vendor is looking to expand aggressively
                            into India, to become a global platform of advanced, integrated and carrier-neutral
                            data centers in high growth markets.

  CHALLENGES               Difficulties in establishing synergies: With Tata Communications and GDS Services
                           being two large conglomerates, it could be a challenge for STT GDC to integrate
                           the data center offerings of these vendors together with ST GDC’s existing network
                           connectivity and data center assets. Difficulties in establishing operational and
                           technical synergies could thus be a roadblock to STT GDC’s expansion plans in the
                           region.

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FROST INDUSTRY QUOTIENT                                                                             WWW.FROST.COM

5.8 SINGTEL

Singtel is the incumbent telecom operator in Singapore, with a strong                 ANALYST STRATEGY SCORE
position in managed hosting, network, hybrid cloud, and professional

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services, among others.

The vendor currently has 12 data centers in Singapore, Hong Kong, and
Australia, occupying a combined raised floor space of more than 100,000
square meters. It also partners with other providers to operate 20 data
centers in other countries in Asia-Pacific. Singtel’s most recent data center
investment is in Singapore’s DC West data center, a US$280-million Tier 3+
facility that was completed in December 2015.

In 2016, Singtel contributed 2.4% to the Asia-Pacific data center services
market revenue.

  COMPETITIVE              Comprehensive end-to-end managed ICT offerings: In recent years, Singtel has been
  ADVANTAGES               reinventing itself as a one-stop ICT solutions provider. It offers a robust enterprise-
                           grade solution consisting of managed hosting, cloud-enabled network, security
                           solutions, as well as infrastructure management, among others. As a result, Singtel
                           has been successful in capturing market share among enterprises with regional
                           headquarters in Singapore and other countries in Asia-Pacific. Singtel’s data centers
                           in Singapore enjoyed utilization of about 80% in 2016.

  CHALLENGES              Risk of data center glut in major market Singapore: Singtel generates the majority of
                          its data center revenue from Singapore. There runs the risk that significant build-outs
                          in Singapore could limit its potential for growth in the data center space, exacerbated
                          by increasing competition from global providers (e.g., Digital Realty, Equinix), as well
                          as up-and-coming local providers (e.g., Keppel Data Centres, IO, Singapore).

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                    WWW.FROST.COM

5.9 CHINA TELECOM

China Telecom is the largest internet data center (IDC) provider in China,            ANALYST STRATEGY SCORE
and hosts a majority of the domestic Internet content and services. Under

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its “8+2” strategy, China Telecom has 8 regional cloud data centers in China
and 2 cloud campuses in Inner Mongolia (Northern China) and Guizhou
(Southwestern China). The vendor has over 300 data centers distributed
across China occupying around 400,000 square meters of raised floor
space.

In 2016, China Telecom contributed 8.0% to the Asia-Pacific data center
services market revenue.

  COMPETITIVE               Excellent in-country reach owing to dominance in network assets and longstanding
  ADVANTAGES                relationships with the government: China Telecom owns more than 70% of the
                            bandwidth in China and operates a comprehensive MPLS (Multiprotocol Label
                            Switching) VPN network that connects the majority of Chinese government
                            departments. The vendor is able to attain market dominance in the country by
                            leveraging its longstanding relationships with provincial and municipal governments
                            as well as Chinese state-owned enterprises, and selling them its bundle of network
                            assets, rack space, power, and cooling provision.

                            Robust one-stop ICT services for Chinese enterprises: China Telecom has been
                            “cloudifying” its data centers, so that data center services can be offered together
                            with cloud services and disaster recovery offerings. With plans to build a third
                            nationwide backbone network alongside the existing ChinaNet and CN2, China
                            Telecom is cementing its position as the provider of the most complete transmission
                            network in China.

  CHALLENGES               Increasing competition from non-Chinese vendors: There has been increasing
                           competition from global vendors targeting the foreign customer base, a segment
                           that China Telecom is seeking to grow. For instance, CenturyLink (US) partnered
                           with Chinese data center provider GDS Holdings to launch its managed hosting and
                           cloud services in China. Other market participants such as Equinix and Telstra are also
                           looking to increase their data center presence in China.

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FROST INDUSTRY QUOTIENT                                                                              WWW.FROST.COM

5.10 DIGITAL REALTY

Digital Realty (US) is the largest wholesale colocation provider globally, and        ANALYST STRATEGY SCORE
focuses on providing data center, colocation, and interconnection solutions

                                                                                        72
to customers. It currently operates a network of eight data centers in Asia-
Pacific spanning approximately 50,000 square meters in raised floor space
across Australia, Singapore, Hong Kong, and Japan.

Key clients include enterprises in the financial services, IT services, cloud,
and telecoms sectors. Other major tenants consist of other data center
participants such as Equinix and Fujitsu.

In 2016, Digital Realty contributed 0.9% to the Asia-Pacific data center
services market revenue.

  COMPETITIVE              Expansion of service offerings beyond space and power: In October 2015, Digital
  ADVANTAGES               Realty completed the US$1.89-billion acquisition of Telx (US), one of the world’s
                           largest interconnection providers. The acquisition enhances Digital Realty’s strategic
                           direction of transitioning toward a value-added participant beyond its core wholesale
                           colocation leasing business. More importantly, it increases the vendor’s attractiveness
                           to customers seeking access to robust interconnection environments with massive
                           wholesale data center space available for lease.

                           Strong turnkey offering: Digital Realty focuses on facilities development, and
                           commands strong mindshare in the turnkey data center construction business space.
                           Its strategy to develop data centers in a modular manner with a low turnaround time
                           of 26 weeks or less confers the vendor a significant edge over its competitors.

  CHALLENGES              Conservative expansion strategy overly concerned with occupancy rates: Digital
                          Realty is currently only exploring building and expanding its data center portfolio
                          in metro cities within Japan, Australia, Hong Kong, and Singapore. The vendor is
                          reluctant to expand to emerging economies for now, as it feels the customers there
                          are not mature enough to demand sufficient colocation services to meet its breakeven
                          occupancy rate.

                          It does, however, have the capability to build in any market in the region if an existing
                          or new customer has a specific requirement for a custom data center facility in that
                          region.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                  WWW.FROST.COM

5.11 GLOBAL SWITCH

Global Switch (UK) targets the large-scale/wholesale data center                    ANALYST STRATEGY SCORE
services market in Asia-Pacific and Europe. It is the leading provider of

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colocation services in Australia, where it occupies 53,907 square meters
of floor space across two data centres, designated Sydney West and
Sydney East. With ongoing construction nearing completion, there is
expected to be an additional 19,000 square meters added to the Sydney
East facility. Global Switch is on the AGIMO (Australian Government
Information Management Office) Data Center Facilities Panel, making it a
preferred partner for the Commonwealth Government and its agencies.

In Singapore, Global Switch is also a leading large-scale carrier-neutral data center provider. The 26,743 square
meters Tai Seng data center hosts a diverse connectivity, cloud and hosting provider ecosystem in the country.

In December 2016, a consortium of private sector Chinese corporate and institutional investors acquired a 49%
stake in the Company.

In 2016, Global Switch contributed 1.3% to the Asia-Pacific data center services market revenue.

  COMPETITIVE               Increasing expansion in Asia: In December 2016, Global Switch announced that it
  ADVANTAGES                signed two major pre-commitments with Daily-Tech Beijing Co., Ltd (Daily-Tech) for
                            new data center developments in Hong Kong and Singapore. For both of these pre-
                            commitments, China Telecom Global will, upon construction completion, become the
                            end customer through direct service agreements with Daily-Tech. Construction of
                            the new 45,000 square meters data center in Hong Kong is nearing completion and
                            scheduled to open in mid-2017. Separately, the construction of the data center in
                            Woodlands in Singapore is expected to be completed in 2018.

                            Aside from the pre-commitments signed, Global Switch also announced in December
                            2016 that it entered into a joint venture agreement with Daily-Tech to develop a new
                            data center in Shanghai.

  CHALLENGES               Pure-play colocation strategy limits monetization opportunities: Global Switch
                           remains primarily a pure-play colocation vendor, which limits the company’s
                           monetization opportunities as colocation services occupy the lower end of the data
                           center value chain. However it should be noted that in addition to existing services
                           such as fit-out and remote hands services, customers of its new Hong Kong data
                           center will have access to a range of cloud and managed services.

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FROST INDUSTRY QUOTIENT                                                                          WWW.FROST.COM

5.12 KEPPEL DATA CENTRES

Keppel Data Centres Holdings (“Keppel DC”) is a 70-30 joint-venture                ANALYST STRATEGY SCORE
company formed in 2011 by Keppel T&T and Keppel Land to consolidate

                                                                                       48
their data center assets. It is also the first data center provider to introduce
a data center Real Estate Investment Trust (REIT) in the Asia-Pacific region.
Keppel DC currently manages and operates more than 25,000 square
meters of raised floor space in Singapore, with other data centers located
in Malaysia and Australia as well. Outside Asia-Pacific, Keppel DC also has
data centers located in Ireland, the United Kingdom, The Netherlands, and
Germany.

In 2016, Keppel Data Centres contributed 0.4% to the Asia-Pacific data
center services market revenue.

  COMPETITIVE             High portfolio occupancy rate: Keppel DC boasts an average portfolio occupancy
  ADVANTAGES              rate of 92%, one of the highest among data center providers. This enables Keppel DC
                          to enjoy operational efficiencies and higher profitability, which could be channelled
                          toward further expansion plans in the Asia-Pacific region.

  CHALLENGES              Pure-play colocation strategy limits monetization opportunities: Keppel DC remains
                          primarily a colocation vendor, which limits the company’s monetization opportunities
                          as colocation services occupy the lower end of the data center value chain. Unlike
                          telco companies, it faces challenges in fulfilling end users’ increasing demand for
                          end-to-end ICT services such as connectivity and other managed solutions.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                   WWW.FROST.COM

                 OTHER DATA CENTER
   6             SERVICE PROVIDERS TO
                 WATCH
While the following data center service providers did not meet the selection criteria to be benchmarked for the
current year of study, they are key vendors to watch out for as well. The profiles vendors is as follows:

NAME OF                       DATA CENTER PRESENCE PROFILE AND COMPETITIVE
VENDOR                        IN ASIA-PACIFIC          ADVANTAGES

  PCCW GLOBAL                   Hong Kong, China       PCCW Global owns a network of data centers across
                                                       six locations in Hong Kong, and one data center in
                                                       Guangzhou, China. Besides colocation and managed
                                                       hosting, PCCW’s service offerings include designing
                                                       and building data centers for customers.

                                                       The vendor has extensive network assets in Greater
                                                       China to facilitate robust cross-border data center
                                                       solutions in the region.

  TELKOMSIGMA                   Indonesia              Telkomsigma is the largest data center provider in
                                                       Indonesia, occupying approximately 20% of its raised
                                                       floor space in 2016. Key verticals served include the
                                                       Banking and Financial Services sector.

                                                       Telkomsigma enjoys strong partnerships with vendors
                                                       such as IBM, and has been transitioning to be an
                                                       end-to-end service provider offering a portfolio of
                                                       colocation services and virtual private cloud solutions,
                                                       among others.

  AIMS DATA                     Malaysia, Singapore,   AIMS is a subsidiary of TIME dotCom Berhad (TIME),
  CENTRE SDN.                   Thailand, Vietnam,     a fixed-line telecommunications provider based in
  BHD.                          Hong Kong              Malaysia. AIMS operates data centers across five
                                                       locations in Malaysia spanning more than 5,100 square
                                                       meters. It has partner data centers in Singapore,
                                                       Thailand, Vietnam, and Hong Kong.

                                                       AIMS is able to gain a foothold in the Malaysian market
                                                       owing to its ability to bundle superior connectivity
                                                       solutions with its data center offerings.

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FROST INDUSTRY QUOTIENT                                                                     WWW.FROST.COM

NAME OF                   DATA CENTER PRESENCE PROFILE AND COMPETITIVE
VENDOR                    IN ASIA-PACIFIC        ADVANTAGES

  VADS BERHAD              Malaysia, Hong Kong   As a wholly-owned subsidiary of Telekom Malaysia,
                                                 VADS Berhad is the largest retail data center provider
                                                 in Malaysia. It operates 14 data centers across the
                                                 country, with a raised floor space of more than 10,000
                                                 square meters.

                                                 VADs’s advantage lies in its ability to offer an integrated
                                                 portfolio of ICT services, including cloud offerings,
                                                 managed security, and managed network services,
                                                 among others.

  TELEKOMUNIKASI           Singapore             Established in 2009, Telin Singapore is an upcoming
  INDONESIA                                      data center provider in Singapore. It currently operates
  INTERNATIONAL                                  three data centers in Singapore. The latest investment
  PTE. LTD. (TELIN                               is the Telin-3 Data Center located at the Singapore
  SINGAPORE)                                     Data Center Park, which is Tier III and Tier IV-certified.
                                                 Telin is a subsidiary of the PT Telkom group.

                                                 Despite being a newcomer in the market space, the
                                                 vendor has grown very rapidly, and is looking to
                                                 expand aggressively in Asia-Pacific in coming years.

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ASIA-PACIFIC DATA CENTER SERVICE PROVIDERS, 2017                                                WWW.FROST.COM

                 THE
   7             ANALYST WORD
Frost & Sullivan expects the lower end of the colocation market, mainly served by pure-play providers who
rent space by racks or cabinets to local businesses, to cease in importance over the next few years. As the
IT environment increases in complexities, many Asia-Pacific enterprises are outsourcing their applications to
third-party vendors to increase operational and cost efficiencies. Further, the more advanced threat landscape
has made enterprises more conscious and open to third-party services to strengthen their info-security.

Managed hosting is emerging as the foundation for most managed services, whereby organizations are
increasingly turning to vendors that are able to offer a robust one-stop end-to-end ICT solution encompassing
rack space, power, cooling, cloud offerings, and managed services (e.g., managed security, cloud orchestration,
managed WAN (Wide-area Network) optimization). Nevertheless, high-end colocation and interconnect
providers will still enjoy growth, as secure, latency-sensitive applications continue to in demand in highly-
regulated verticals such as the financial services sector.

As market competition intensifies in the Asia-Pacific data center landscape, with increasing threat emerging
from region-specific providers, it is imperative that market participants incorporate value-added services
complementing their data center portfolio to increase their value propositions. Data center vendors competing
in saturated markets such as Japan and Australia should also consider broadening their geographical reach to
diversify their portfolio revenue.

Security, disaster recovery, and business continuity planning solutions will be key areas of expansion for data
center service providers to minimize downtime and ensure data confidentiality. In optimizing data center
operations, the emphasis will be on data center design and architecture in which technologies are deployed
using hyper-converged infrastructure, modularization, software-driven systems, and consolidations.

                 FROST IQ METHODOLOGY
   8             – GROWTH STRATEGY
The focus of Frost IQ is to provide a balanced assessment of an industry. The industries analyzed are those that
Frost & Sullivan analysts have tracked over a period of time. Data collected, for instance vendors’ revenue, is
scrutinized and forms part of the input for the Frost IQ Matrix. Additional information is collected from various
sources including interviews with market participants.

The approach includes a mix of quantitative and qualitative assessment. The Frost IQ Matrix has two major
axes. These are revenue market share and future growth strategy.

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FROST INDUSTRY QUOTIENT                                                                         WWW.FROST.COM

  1. REVENUE                Market share information is derived from Frost & Sullivan research. This research
  MARKET SHARE              includes market trackers and syndicated research reports. From regular research
                            conducted at quarterly, semi-annual or annual intervals, Frost & Sullivan analysts
                            build a revenue database for vendors in the market.

                            The X-axis of the Frost IQ Matrix measures the relative market share of market
                            participants on a percentage scale. The mid-point of the axis on the matrix is
                            set at 50% of the market share of the leading participant in that market.

  2. GROWTH                 Frost & Sullivan considers four main components in the growth strategy, the
  STRATEGY                  Y-axis of the Frost IQ Matrix. The guiding principle is that these components and
                            their subcomponents should follow the Mutually Exclusive and Comprehensively
                            Exhaustive (MECE) test. The components are as follows:

                                   Product/Service strategy;

                                   People and skills strategy;

                                   Ecosystem strategy; and

                                   Business strategy

There is an equal weightage to all the components, with measurement on a 100-point scale. The dividing line is
at the mid-point, i.e., a weighted score of 50 on a 100-point scale. Analysts make assessments of the industry
participants’ strategy for the above parameters.

Details of the subcomponents are available, if required.

                                                       26
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